The Housing Crisis of 2008 had long-lasting effects on homeowners. It took almost a decade to see changes in home values or at least worthwhile changes. Now there’s the coronavirus pandemic and we’re in another recession, but this time it’s different.
We aren’t dealing with rock-bottom housing prices or mortgage lenders facing repeated losses due to a multitude of foreclosures. While millions of Americans are out of a job still, the housing market hasn’t nosedived yet.
But since we’re in the midst of the recession, now may be a great time to buy a home, here’s why.
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Low Interest Rates
We can’t love coronavirus for the toll it took on many lives, but it lowered interest rates. If there’s a silver lining, there it is.
Interest rates are the lowest they’ve been since the housing crisis. If you’re waiting for the ‘perfect payment,’ you may get it now. While the Fed keeps its rates low to keep money moving in the economy, it’s a great time to take advantage of mortgage rates and buy a home.
Choose a fixed rate loan to have that rate locked in and you don’t have to worry about what happens in the next few years.
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Lower Housing Prices
Anyone selling their home now needs to move. They aren’t doing it because they want to size up or moving just for the fun of it. They either can’t afford the mortgage, but don’t want a foreclosure or their job moved them.
Either way, sellers are motivated, which makes them more likely to negotiate. While you can’t steal the homes, you may pay much lower prices than during a regular economy.
Sellers Give More
Motivated sellers provide more help. If you want the window treatments or furniture included, sellers may oblige. If you need closing cost assistance or can’t close for 60 days, sellers may agree. They know buyers are scarce, so they won’t run you off by saying no to your demands.
Less Competition
Even with low rates, many buyers can’t get a loan. Many potential buyers don’t have the down payment or don’t have a job so they can’t borrow money. This means fewer buyers in the market. With fewer buyers bidding for the same home, you get what you want without hassle.
Homes Sit Longer
Recessions make qualifying for a mortgage hard. If buyers can’t get financing, homes don’t sell. The longer homes sit on the market, the more desperate sellers get. If a home sits long enough, sellers may lower the asking price before you even bid. Once you find the home and negotiate, you get quite the deal on the home.
Watch out When Buying a Home During a Recession
Buying a home during a recession has many benefits, but there are downsides.
- What happens if you lose your job? No job is 100% secure, especially during a recession. Even with the best deal, if you don’t have a job, a mortgage may be unaffordable. Now you put yourself at risk of foreclosure.
- Banks get tougher. Recessions affect banks too. They won’t lend to just anyone. Lenders make sure you can afford the loan. They may require you to have liquid assets in an emergency fund too. They have to protect themselves from loss.
- Investors may be lurking. Recession prices are an investor’s goldmine. Buying homes at rock bottom prices and selling them for a lot more when the economy improves is the perfect recipe for investors. With more buyers in the market, competition increases.
Buying a home during a recession may have a great outcome. Do your homework like you would during any economy. Check the loan’s affordability, the home’s historic values, and make sure you love the neighborhood. A home is one of the largest investments you’ll make in your life; enter the transaction with caution for the best results.